Buyers are hoarding money as optimism about international progress hits report lows and fears of stagflation or perhaps a recession intensify, based on the most recent Financial institution of America survey of fund managers. Financial institution of America analysts stated the most recent survey outcomes reveal that the downward pattern in U.S. shares might proceed.
Financial institution of America clients’ ‘money hoarding’ hits highest degree in twenty years
Financial institution of America described the outcomes of the Might survey as “fairly bearish” after buyers’ money ranges hit their highest since September 2001, whereas stagflation considerations have been at their highest since 2008. The newest Financial institution of America survey of institutional buyers with property underneath administration of $872 billion additionally confirmed that buyers see a collective “hawking” of central banks as the most important tail danger, intently adopted by a worldwide recession.
The transfer comes after international inventory markets suffered their longest weekly shedding streak for the reason that international monetary disaster because the world’s main central banks persevered in tightening financial coverage at the same time as inflation remained excessive. Whereas shares have rallied barely since Friday as valuations have turn out to be extra enticing, strategists equivalent to Michael Wilson from Morgan Stanley say there might be extra losses in earnings forward.
Financial institution of America strategist Michael Hartnett stated in a report that the majority buyers consider that the present inventory market is susceptible to a “bear market rally”, however most nonetheless consider that the ultimate low has not but been reached. Recession fears have been adopted by inflation dangers and the Russia-Ukraine battle, the survey outcomes additionally confirmed that bearish sentiment has been excessive sufficient to set off a “purchase” sign in Financial institution of America’s analytical mannequin, a “contrarian indicator.” , used to foretell the very best time to enter the inventory market.
The survey additionally confirmed that tech shares are of their largest “bearish state” since 2006. As rates of interest rise and buyers fear about future earnings, the most recent sell-off has been notably sharp in frothy (largely unprofitable) tech shares.
The survey outcomes present that, total, buyers are typically “money lengthy”, whereas bullish on commodities, well being care and client staples sectors, and bearish sentiment for expertise shares, total inventory markets, European shares and rising markets.
The Might survey outcomes additionally confirmed:
Buyers now anticipate the Fed to boost charges 7.9 occasions on this tightening cycle, in contrast with 7.4 within the April survey.
Most fund managers have decreased their fairness holdings since Might 2020.
Since Might 2020, investor positioning has shifted to probably the most defensive sectors, with utilities, staples and healthcare shares including a mixed internet acquire of about 43%.
Foreign money danger is seen as the most important potential danger to monetary market stability, surpassing geopolitical danger.
A “Fed Pushed Put” for the S&P 500 is anticipated at 3,529, about 12% under present ranges.